Peter Henner has been an active and outspoken opponent of the
deregulation of electric utilities, both as an attorney and as an
academic. He believes that deregulation has and will continue to fail
to provide any benefits for electric consumers. Furthermore, the
push for "competition" in the electric industry arises from the same
ideological stupidity as the potentially disastrous neoliberal policy
of privatizing public utilities that the International Monetary Fund
and the World Bank are attempting to force upon developing countries.

In 1998, Peter commenced a lawsuit on behalf of several upstate New
York municipalities against the New York State Public Service
Commission challenging the restructuring of Niagara Mohawk Power
Corporation. The suit alleged that the Commission failed to consider
the prospective environmental impacts of its deregulation plan. He has
also represented the Town of Cortlandt, the host community for the
Indian Point nuclear generating plants, in proceedings in New York
State Supreme Court, the Nuclear Regulatory Commission, the Public
Service Commission, and the Department of Environmental Conservation,
with respect to issues posed by the sale of those plants.

The movement towards "deregulation", which is also referred to as
establishing "competition", resulted from three unique factors that
occurred in the 1970s: 1) the belief that oil prices would continue to
rise indefinitely, 2) a temporary halt to increasing energy demand, and
3) rising interest rates. These factors placed a tremendous stress on
both the traditionally regulated utilities and their customers. The
policy decisions made in response to the energy crisis of the 1970s
were ostensibly designed to encourage alternative, renewable energy.
However, the only result of the new policies is to remove long-standing
protections that prevented the public from being gouged by high
electricity prices.

Prior to the 1970s, the regulatory structure encouraged utilities to
build bigger and more capital intensive power plants, including nuclear
plants. However, in the 1970s, rising interest rates made it more
difficult for utilities to recover the cost of borrowing for
construction costs for plants that would take years to come on
line. Furthermore, by the time these plants came on line, they
were not needed, because of falling energy demand. As a result,
it became difficult for utilities to recover their costs without
dramatic increases in electric rates.

At the same time, there was a growing perception that the United States
could not continue to be dependent upon foreign oil, and that it would
be necessary to develop renewable, non-fossil fuel sources of
energy. Since oil prices were expected to continue to rise
throughout the 1980s and 1990s, Congress, and many state legislatures,
believed that it was necessary to encourage other sources of
electricity. The Public Utilities Regulation Policies Act of 1978
(PURPA) encouraged the development of independent power producers by
requiring utilities to purchase electricity from them. Although
PURPA attempted to encourage renewable energy resources, most of the
new power plants that were built to take advantage of PURPA were
gas-fired cogeneration plants.

Non-utility power generation was further encouraged by the Energy
Policy Act of 1992, which established a new class of power producers
known as Exempt Wholesale Generators. The Federal Energy Regulatory
Commission adopted Order 888 in 1996, which required electric utilities
to grant access to transmission facilities to non-utility generators.
This enabled the non-utility generators to compete with the utilities
for customers, and enabled the theoretical possibility of competition.
Since 1996, approximately half of the states have restructured their
electric utilities, to establish "competition" for the sale of
electricity over transmission and distribution facilities that are
still owned by regulated utilities.

Deregulation was encouraged by large industrial users, who hoped to be
able to purchase electrical power at lower prices than they could get
from utilities. Utilities also tended to favor deregulation,
especially when public utility commissions permitted them to recover
their so-called "stranded costs". Utilities that owned power plants
which were not economical, including nuclear power plants, were
required to sell them. The plants were sold at significantly less than
their book value, but the utilities were allowed to recover the lost
investments through surcharges to electricity customers.
Therefore, utilities were able to use “deregulation” to escape the
consequences of bad investment decisions, and to pass the burden for
such decisions to the public.

Initially, some advocates of renewable energy resources supported
deregulation, in the belief that it would enable consumers to purchase
electricity from renewable energy sources, rather than from electric
utilities. However, because new renewable energy sources are still more
expensive than fossil fuels, deregulation has not encouraged renewable
energy.

Partly as a result of deregulation, energy suppliers have built a
disproportionate number of “peaking” facilities, frequently using
natural gas. These facilities have relatively low capital costs
relative to operating costs. These plants also have a relatively
high average cost for generating electricity. However, such plants can
be turned on and off relatively quickly, and can go on-line during
times of peak demand, when energy prices are highest. However, the
emphasis on constructing these plants to maximize short-term profits
has resulted in a shortage of “base-load” plants. Base-load plants,
which are typically larger, more capital intensive, and have lower
average costs, were favored in a regulated environment. The failure to
construct new base-load plants under deregulation will result in a
shortage of relatively inexpensive electricity during non-peak times,
and will ultimately result in higher prices.

Deregulation has not reduced the price of electricity. Indeed, because
of the requirement that customers pay the "stranded costs", electric
rates initially rose under deregulation. Furthermore, energy
suppliers have shown little interest in selling electricity directly to
individual customers, especially residential customers, or in
developing “base-load” energy facilities, which will ensure an adequate
supply of relatively inexpensive electricity. The relatively few large
corporations that now own power plants now sell their power directly to
the utilities, at an unregulated price, which is then passed on to
customers. In effect, a regulated monopoly has been replaced by an
unregulated system, dominated by a few large energy suppliers. As
Enron demonstrated in California in 2001, this can be a recipe for
disaster.